Xbox One review: This is the console of the future

For $499, the Xbox One includes the second-generation motion-sensing Kinect bar and a standard controller. Source: Microsoft

FORTUNE –If the Xbox One isn’t already near the top of your holiday wish list, it should be.

With Microsoft’s MSFT Xbox One, due out this Friday, it’s clear the company is gunning for the living room, marrying TV viewing, game play, and Internet-connected services to an unprecedented degree. At $499, it may cost $100 more than the Sony (SNE) PlayStation 4 that was released last week, but the extra cash nets users a next-generation user experience, including menu navigation and gameplay driven by voice recognition and gesture.

With this device, Microsoft wants to own the living room in a way the company’s previous products never could, with more advanced hardware and software that juggles everything from playing games to scanning a player’s skeletal frame and musculature. It’s the first time in a while you’ll be excited to see the Microsoft logo when you rip open the wrapping paper.

The hardware. One word: huge.The Xbox One is a beast, dwarfing the PlayStation 4 and Wii U and most other consoles of recent years. (It’s so large in fact, it’ll challenge old-school VCR boxes in sheer size.) There are some nice accents on the jet-back plastic console up-close — a two-tone juxtaposition of matte and shiny textures, a grill top that covers half the device, some silver chrome, and a touch-activated power button doubling as a logo — but the Xbox One’s industrial design is more utilitarian than looker. The same goes for the new Kinect 2 motion-sensing bar, roughly the size of a Febreze can and meant to sit closer to the television.

The controller bears a strong resemblance to the Xbox 360’s, but the look and feel has been refined. The two handles on either end are slightly more contoured for holding. Buttons click in an appreciably more premium-feeling way. (In the particular, the direction pad has been redesigned and feels a lot less cheap and a lot more usable.) Microsoft also integrated four vibration motors instead of two this time around. So instead of the entire controller rumbling, developers can make the sensation more localized. It’s a very subtle distinction but one that adds to the immersiveness of gameplay during games like Forza Motorsport 5, as players take corners. The controller isn’t as ergonomic as the PlayStation 4’s, which wins my personal award for best-feeling console controller ever, but players won’t grouse about discomfort here, either.

Ryse: Son of Rome is one of the Xbox One’s killer launch games.

The software. In recent years, Microsoft has pushed a visual experience based on flat, two-dimensional tiles. Windows Phone pioneered it, Windows 8 followed, and so does Xbox One. It’s clean, minimal and easy-on-the eyes. And while learning how to navigate around the PlayStation 4’s menus took less than five minutes, getting around the Xbox One was even quicker — it’s just more intuitive.

Getting set up was a thoroughly simple, though lengthy process, with a series of software updates that required installation before I could get going. (A spokesperson for the company indicated consumers won’t have to download the same updates or wait nearly as long.) With the Xbox 360, the Kinect was only required for a subset of games. Here, the Kinect is technically not mandatory either — a change in policy from a company statement this spring. But given how each unit comes packaged with one, not to mention that the Xbox One and several launch games use voice recognition, and the Kinect feels all-but-essential to get the most from Microsoft’s new device. It’s not mandatory that users issue voice commands to navigate around, but in some cases, it’s actually easier. For one, commanding the device to power up by saying “Xbox On” — which it does in around 10 seconds — sure saves me the small hassle of walking back-and-forth across the room. The same goes for the other tasks like movie playback. Telling the Xbox to fast-forward and turn on closed-captioning is easier to do via voice than fiddling with the controller and for once, feels less like a gimmick.

In other cases, voice recognition still doesn’t quite cut it. For now, the Kinect seems fine with basic commands — going to the console’s main screen, switching between apps, and actual video playback — but getting from Point A to Point B in Netflix (NFLX) and Hulu entirely by voice sometimes felt like it took twice the time it normally would if I had stuck with using the controller, even after Microsoft recommended I re-calibrate Kinect to better pick up my voice. There are clearly kinks to be worked out, so for now, the best way to get around may yet be a combination of button presses and voice.

Microsoft is pushing the Xbox One not just as next-generation gaming device but as serious home entertainment hub. By hooking up a cable or satellite box to the console, users can browse programming, change channels, as well as raise and lower volume by issuing basic voice commands such as “Xbox, volume up.” A new software feature called “Snap” serves as Microsoft’s interactive take on TV’s “picture-in-picture” feature. It’s a vertical pane summoned by voice or controller to the right side of the television screen where users can have something else running at the same time: TV, music, video and so on. It worked mostly as advertised, although in a few tests, the movie Man of Steel seriouslystuttered in the Snap pane, while I played a game on the main screen. In other cases, the film played smoothly. (Microsoft says the performance issue will be fixed by launch.)

No new console would be compelling without a solid stable of games. As I mentioned last week in my PS4 review, many of that console’s initial titles, including Assassin’s Creed IV: Black Flag and Battlefield 4 will also be available for Xbox One on the first day, and indeed, the former is already available for older consoles, too.

Players will likely spend tens of hours racing and tuning up cars in Forza Motorsport 5.

Xbox One has two killer exclusive titles. Ryse: Son of Rome starts off feeling like a deceptively simple and predictable hack-and-slash action adventure but gradually layers on more complex gameplay, introducing new moves and strategies for players to earn experience, customize their warrior’s skills, and execute entertaining execution kills. And car aficionados will likely spend tens of hours racing and tuning up their cars in Forza Motorsport 5, where the gameplay is as superficial or as deep as the player’s skill level.

The verdict. A new console may live or die based on its initial games, and here is where the Xbox One trumps the PlayStation 4. Both Ryse and Forza Motorsportare the kind of graphical showcases that should move consoles throughout the holiday season.

Microsoft and Sony are positioning their consoles as multi-purpose entertainment hubs for the living room, and some consumers may make their decision simply based on price. (After all, the PlayStation 4 is $100 less.) But if Microsoft can iron out some performance quirks around voice recognition and Snap, the decision won’t be too hard: it’s far easier to glimpse the future potential in the Xbox One, starting with 10 seconds of time and the simple two-word voice command: “Xbox on.”